“You can make anything by writing.”—C.S. Lewis
When I began my career in life insurance, I represented a “Northeastern Mutual” as such companies were called back then. Initially, I sold life iInsurance primarily to families. A senior agent in my office told me how to make a favorable impression on my clients such that they would remember me fondly. He said, “Throw out the plastic cover in which the Company issues the policies and buy leather pocket folders instead. Place each policy in the leather folder and present it formally when you deliver the policy.”
This turned out to be something the clients liked, but I doubted that it made all that much difference in our client-agent relationship.
Then something happened years later when I was now in the closely held business market. I sold a $5 million 20-year level term policy to a wealthy client. We agreed to meet so I could deliver the policy. I neglected to wait until more leather folders arrived. I went to the man’s office and handed the policy to the client across his desk. It was not even in a plastic cover. The policy consisted of the front and back paper cover that wrapped the policy pages, and all of it stapled together.
When he closed his fingers over the fold, an errantly raised staple punctured the tip of his forefinger. He said, “ouch,” and dropped the policy on his desk. What he said next convicted me and caused me to blush with shame.
“I am paying $9,000 per year for this insurance. How much does someone have to spend before you are willing to invest in a proper policy wrapper?”
Lesson learned.
Paper
“The visionary starts with a clean sheet of paper and re-imagines the world.”—Malcolm Gladwell
We take many things for granted, including paper.
In the Winter of 1777-78, George Washington’s Continental Army famously suffered serious deprivation in the snows and cold of Valley Forge. Throughout the Spring they resupplied and rebuilt their fighting preparedness. As of June 1778, however, they still lacked one key necessity—paper for their muskets. To achieve readiness ahead of the Battle of Monmouth, army commanders sent fighting men out in search of paper. They found a house where Benjamin Franklin once lived and where there was a printing office. There they found 2,500 undistributed copies of a sermon written by the Reverend Gilbert Tenant, entitled, “Defensive War.” They sent all this paper back to Monmouth for use in plugging the muskets. In the end, the ferocious battle with the British ended in a draw. 1
When I attended Miami University in Oxford, OH, in the late 1970s, a popular major was Pulp and Paper Technology. Ohio was home to numerous paper mills, including several for Mead Corporation, which at the time was one of the largest paper producers in the United States. The Mead Paper Mill in nearby Dayton, OH, was established in 1848.
The first U.S. paper mill was built in Pennsylvania in 1690. Until the mid-1860s American paper mills used the Chinese method of shredding old rags and clothes into individual fibers to make paper.
The paper used to print the original Declaration of Independence was Dutch. The first copies of this quintessential American document bore at least three different Dutch manufacturer watermarks. “The Federalist Papers,” a 1788 collection of essays by Alexander Hamilton, James Madison, and John Jay were printed on English paper.2
The first wood-based paper was not made in the United States until 1863.
Before the 1870s, newspapers were printed on rag paper made of cotton and linen fibers, according to Timothy Hughes Rare and Early Newspapers, a dealer in old newspapers. These materials often originated as discarded clothing. Rags. “Because so much paper was consumed in the printing of newspapers, the latter became known as ‘rags.’”3
Rags to be made into paper were in short supply in the United States during the Civil War. After the Battle of Gettysburg in the Summer of 1863, ragmen came to strip off the blood-soaked uniforms from the fallen to sell to papermakers. “Three ragmen loaded their wagons with the clothing they had stolen and sold it to the Jacob Hauer paper mill on nearby Codorus Creek.”4
The mill found supplies of rags difficult due to the disruption of the war on their supply chain of wandering ragmen (men who gathered rags from people looking to dispose of their worn-out garments). The mill welcomed any and all rags up until the uniforms, bandages, and slings arrived from the Gettysburg Battlefield. “The army sent in cavalry and infantry troops to stop the stealing, and the 21st Pennsylvania Cavalry apprehended the three ragmen as they were taking a wagonload back to the paper mill.”5 These three men served their punishment by clearing battlefields of dead horses, the dirtiest and hardest of jobs. The mill went out of business, and subsequently was sold at auction to a man named Philip Henry Glatfelter. The Glatfelter Company still makes paper today at the same location.
As the demand for paper grew, the mills changed to using cellulose fiber from trees because wood was less expensive and more abundant than cloth.
Life Insurance on Paper
In the distant history of life insurance, companies issued certificates to the person who sought financial assistance upon the death of the insured. A sort of gambling became popular in which people bought certificates of life insurance on public figures. In the U.K., the Life Insurance Act of 1774 put an end to gambling in that it stipulated a person had to have an insurable interest if he was to take out a life insurance contract on somebody else.
In America, individual states began crafting regulations designed to protect life insurance consumers and restrict fraud. Not surprisingly, the states with the most active legislatures were also those states in which the most insurance companies were domiciled. (New York, Connecticut, Pennsylvania, New Jersey, Massachusetts.)
Whereas only 43 companies existed in the United States on the eve of the Civil War, the growing popularity of life insurance resulted in the establishment of 107 companies between 1865 and 1870.
Until the late 1860s, all of the life insurance policies issued in the U.S. were printed on rag or linen paper. The majority of these policies consisted of one or two pages. No consistent standards existed in regard to the provisions or stipulations of these policies.
A demand for federal oversight of the life insurance industry grew in the aftermath of the Civil War. Thankfully, the industry and the individual states agreed that the life insurance industry was best governed through state regulation. However, an apparent need arose for a method for coordinating regulations between states.
On May 24, 1871, the very first meeting of The National Convention of Insurance Commissioners convened in New York. Representatives from the various participating states traveled by stagecoach and train to New York City. The organization changed its name officially in June 1936 at the Annual Meeting which took place in St. Paul, MN. The new name: “National Association of Insurance Commissioners.”
In 2021 the NAIC celebrated its sesquicentennial anniversary. This is from the NAIC’s website:
Thinking Nationally, Acting Locally: Our state-based system brings regulators together and empowers them to act in the best interests of the people in their states. At the same time, we also enable commissioners to collaborate and learn from each other, while applying resources to individual states’ needs.6
In 1995 the NAIC adopted the “Life and Health Insurance Policy Language Simplification Act” known as NAIC Model Regulation 575.
This Model Regulation provides guidance to life insurance companies in drafting policy language. “The purpose of this Act is to improve policy language in order to facilitate the insured’s understanding of the coverages provided.”7
Section 5, Minimum Policy Language Simplification Standards, provides this guidance: “No policy forms…shall be delivered or issued for delivery in this state, unless:
(1) The text achieves a minimum score of 40 on the Flesch reading ease test;
(2) It is printed, except for specification pages, schedules, and tables, in not less than ten-point type;
(3) The style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsements or riders; and,
(4) It contains a table of contents or an index of the principal sections of the policy, if the policy has more than 3,000 words printed on three (3) or fewer pages of text.”
Note the words: “It is printed.”
What’s on the Paper
A typical life insurance policy spells out who the parties to the contract are. The policy defines each of the following: the Insurer, the Insured, the Applicant-Policy Owner, and the Beneficiary. Beyond defining the parties, life insurance policies contain extremely important provisions. These are designed to provide the consumer with understanding, protection, and clarity. Many standard features were introduced singularly by individual companies throughout the industry’s history.
Examples:
- In 1864, Manhattan Life introduced the Incontestability Clause into their policies in an industry first that became law 40 years later.8
- In 1860, New York Life was the first insurer to issue life insurance policies containing a Nonforfeiture Clause, entitling the policy owner to a prorated benefit or refund if they missed a payment.9
In addition to these key provisions, life insurance policies include:
- Free Look Provision. Companies give the policy owner a period of time to return the policy after acceptance and receive all premiums paid.
- Grace Period. Companies grant the policy owner an additional period of time to pay the premium after it has become due.
- Suicide Clause. Insurers will not cover a death caused by a suicide that occurs during the first two years of the policy.
- Reinstatement. Companies allow policy owners to reacquire coverage under a policy that has lapsed due to failure to pay premiums if new proof of insurability and payment of all missed premiums are submitted.
- Entire contract. Companies will include a provision that the policy, together with the attending application, a copy of which application shall be attached to the policy and made a part thereof, shall constitute the entire contract between the parties.
The hands of a policyowner, who is in receipt of a freshly-delivered life insurance policy, hold—in readable print and on spine-bound paper—the contractual reality of both the dream and the determination to provide for one’s family.
Summary
Life Insurance is a printed contract, governed principally by state law. It is basically a promise that the issuing carrier makes to pay a specified amount of money to a designated beneficiary when the insured person dies. The promise is made in consideration of the application and the payment of premiums.
The policy is a printed document that covers all the benefits, terms, and conditions of the policy. Within the legal world of contracts, life insurance policies are unique because they contain provisions that are aleatory, unilateral, and contracts of adhesion.
“’Aleatory’ means that the insurer’s promise to pay the policy proceeds is conditioned upon an uncertain event (i.e., the insured’s death within the term of the contract).
‘Unilateral’ describes the fact that the insurance company is the only party to the contract which makes a legally enforceable promise.
‘Adhesion’ is a legal recognition that the policyowner was not in a position to negotiate with the insurer on the terms of the contract and the resulting document is not evidence of the normal ‘give and take’ negotiation and bargaining found in a standard contract.”10
All this, and paper too.
While we no longer rely on paper wads to prepare our weapons, paper is an important part of everyday life. “We use wrapping paper, greaseproof paper, sandpaper, paper napkins, paper receipts and paper tickets. We decorate our walls with wallpaper, posters and photographs, we filter tea and coffee through it, package milk and juice in it and as corrugated cardboard, we use it to make boxes.”11
Paper, in the form of a life insurance policy, acts as material proof of our promise to provide for our dependents, ensuring that our planned goal for their economic well-being, even after our death, will actuate in a disciplined manner.
We can make our love posthumous because of two wonders: Life insurance and paper. Even as precious as trees are, it is fair to say that life insurance is worth the paper.
Footnotes:
- “Paper—Paging Through History,” by Mark Kurlansky, W. W. Norton & Company; Illustrated edition (May 23, 2017), ISBN-13: 978-0393353709.
- Ibid.
- https://www.cincinnati.com/videos/news/2016/04/08/82802968/.
- “Paper – Paging Through History,” by Mark Kurlansky, W. W. Norton & Company; Illustrated edition (May 23, 2017), ISBN-13: 978-0393353709.
- Ibid.
- https://content.naic.org/about.
- NAIC Model Regulation 575 Life Insurance Policy Language Simplification, April 1995.
- https://www.manhattanlife.com/About-Us/History.
- https://www.newyorklife.com/newsroom/history-of-innovation.
- Article written by Stephan R. Leimberg, Robert J. Doyle, Jr., and Keith A. Buck found here: https://www.thinkadvisor.com/2016/08/10/15-legal-issues-every-life-insurance-policy-should-address/.
- “How the invention of paper changed the world,” Tim Harford, BBC World Service, March 2017, https://www.bbc.com/news/the-reporters-38892687.
